Nigeria
31 August 2015
Jared Cordell
Ellen Canup
Shannon Stineburg
Pre-Colonial & Colonial History
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Artifacts trace early civilizations as far back as 500 BCE
Igbo, Hausa, Fulani, and Kingdom of Benin
Began trade with European powers 15th-16th century
Became center of slave trade through 19th century
British moves against slave trade began early 1800’s, with Lagos
becoming a colony in 1861
• 1885 Berlin Conference solidified Britain’s claim to Nigeria, creating
northern and southern colonies by 1901
• Typical British indirect rule, favored Lagos and south over Islamic north
Independence
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Independence in 1960
Initially coalition government, parties ethnically/religiously aligned
Cycle of military coups began 1966, with 2
Civil war 1967-1970 over secession of Biafra (SW region)
Cycle of military coups, occasional civilian rule
Gradually led to regional/religious diversification of parties by late ’90’s
Military & unstable civilian rule suppressed economy and deeply entrenched
patronage/corruption
Demographics
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Population: 160-180 million
50/50 rural urban split, 24 cities over 100k
389 ethnic groups; Hausa, Fulani, Igbo, Yoruba
63% population under 24; median age 18 yrs
5-15 million strong diaspora, maintains strong
ties to Nigeria
• Concentrated in US, UK, South Africa
• Significant, well-educated & empowered middle
class, about 20% of population
• Emerging consumer economy
Oil
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Oil began in 1958, independence economically hopeful
Joined OPEC in 1971
Government spending in 1970’s, borrowing against oil
“Dutch Disease” in 1970’s-1990’s suppressed
economy
Economy gradually diversified; oil 14% of Nigerian
Economy, but 80% of government revenues
Oil theft thought to siphon off 100,000-500,000 bpd
Sector corrupt, with $ billions unaccounted for
Largest gas reserves in Africa, historically burned off
Political Economy
• ECOWAS founding member (1975), HQ in Abuja
• West African Monetary Union, creating common
currency, Eco, among 6 countries
• Club de Paris debt restructuring member, 1st country
to complete compact, repay renegotiated debt
• Active UN participant since Independence
• Founding member of OAU and AU, militarily engaged
• Received hundreds of World Bank loans targeting
poverty reduction projects, currently 29 ongoing, $10
billion+
• In good standing with IMF; regional financial anchor
state
• AGOA participant, decreasing impact due to decrease
in US oil imports
• Has not/Does not meet MCC compact minimums
Democratization
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Prior to 1999, 29 years of military rule vs. 10 years
civilian
1998 Gen Abubakar embarked on ambitious
constitutional democratization; election May ‘99
1999 Election of Obasanjo (former military dictator)
Obasanjo’s People’s Democratic Party (PDP)
significant in nationalizing politics
PDP dominated politics through first 4 presidential
elections (in national elections)
National elections marked by steady improvement,
but also political violence (700 killed in 2011
election)
2015 election most successful yet, still marked by
discrepancies but little violence
Presidents informally switch back and forth
Christian/Muslim
2015 Election Pres Buhari (former military dictator),
first transition to opposition All Progressive’s
Congress (APC), also broad-based national party
Both party’s platforms very similar, 2015 election
assessed to be poll on former administration
Problems but Progress…
Violence and Insurgencies
• Boko Harem in North, tribal
insurgents in Niger river delta
• Southern insurgencies date to
early 1990’s, in response to oil
extraction
• Previous administration paid off
militant leaders, violence
decreased
• BH, 2009, active in NE
provinces, affiliated with IS
• Responsible for about 20,000
deaths
• Multinational efforts, February
push have met progress, but BH
still a significant threat
• Buhari’s victory over Jonathan
attributed to failures against BH
Legatum Index: Bottom 11%
Global Competitiveness Index: Bottom 12%
Economy I
142
~6.5%
2010 World Bank Report:
• 25.89% of those in poverty in Africa
(Below $1.25/day) lived in Nigeria
• Nearly two-thirds of Nigerians live below
poverty line
Economy II
Economy III
*2014: Nigeria’s statisticians recalculated its GDP figures to take account of new
industries such as mobile telecommunications and discovered that it had become Africa’s
biggest economy, ahead of its main economic and geopolitical rival, South Africa.
Nigeria Inflation Rate is 9.2%
• Food +10.0%, imported food +10.4%
• Housing, water, electricity gas +7.3%
• Clothing and footwear +9.3%
• Transport prices +9.1%
• Education +9.2%
• Health +8.7 %
Import/Export
Exports I
Exports II
“Exports” III
Imports
Nigeria ought to be Africa’s biggest oil
and gas producer, yet it suffers crippling
fuel shortages
Non-oil Sector Growth
The economy is diversifying and is becoming more services-oriented, in particular
through retail and wholesale trade, real estate, information and communication.
Current Breakout of Growth:
• 57% services
• 21% agriculture
• 9% manufacturing
Issues:
• A country that should be the region’s breadbasket cannot even feed itself.
• The whole country produces only as much electricity as a single medium-sized
European city.
Tourism
Institutions I
Two Key Problems:
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144
• Corruption
• Inability to provide basic services
Nestle Factory: it has to generate its own power, clean up its own water and
provide health care for its employees, and poor transport links drive up the
cost of its raw materials. Even so, it is one of the company’s most efficient
factories on the globe, in part because of the benefits of scale from producing a
narrow range of products for a huge market
Improved water source, rural
(% of rural population with access)
Improved water source, urban
(% of urban population with access)
Institutions II
Corruption
• The World Bank estimates corruption’s direct cost to Nigeria to be as high
as 12 percent of GDP.
• Control of corruption, which showed significant improvement in 2003 to
2008, deteriorated when President Jonathan took office
• President Buhari, elected in June, ran on a platform of anti-corruption.
Infrastructure
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Health
Characterized by:
• Lack of coordination
• Fragmentation of services
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• Dearth of resources including drug and supplies
• Inadequate and decaying infrastructure
• Inequity in resource distribution
• Access to care and poor quality of care
Only 0.4 Doctors / 1000 people
Presidents Emergency Program for AIDS Relief (PEPFAR)
• Adult HIV prevalence is 3.1%
Successes
• Polio: No new cases since 24 July 2014
• Ebola outbreak containment
• Liberian man arrived by airplane into Lagos, Africa's most populous city. Died in
hospital 5 days later, set off a chain of transmission that infected a total of 19
people, of whom 7 died.
Education
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Literacy rate: 66.4%
Primary school participation, Net attendance ratio male: 72%
Primary school participation, Net attendance ratio female: 68%
Primary school participation, Survival rate to last primary grade: 79.9%
Primary School Enrollment
Female Literacy Rate
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2012: Agricultural Transformation Agenda
• Nigeria spends over $11 billion annually on imported rice and sugar
• Aimed at reducing Nigeria’s increasing reliance on food imports
• Growth Enhancement Scheme:
• subsidizes the costs of such major inputs as fertilizer and seedlings
• free mobile phones to farmers
• provide timely information on input and crop prices
• facilitate mobile banking
• 2013: Government claims that nearly a half million jobs were created
• Agriculture could provide help mitigate decline in the oil industry
Security Issues
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Security Issues
Insurgency in the north-east and other parts of the country
• Claimed about 20,000 lives and forced some 1.5 million people from their homes
• Humanitarian situation: An increased number of both internally displaced persons
and refugees in neighboring Cameroon and Niger
• Negative implications for investment
• May hamper the fight against poverty
• Increase crime
In February under President Buhari, an offensive against Boko Haram drove militants
from most big towns and pushed them back into a few forest and mountain hideouts.
Problems I
Problems II
Problems III
Corruption
Major rural-urban and regional tensions
• Varying natural-resource endowments
• Unequal access to political power
• Uneven shares of national wealth
• Insufficient federal services
Infrastructure Issues:
• 40% of the federal primary road network is in poor condition
• 18% of 197,000 kilometer road system is paved
• Backbone of the rail network is over 100 years old
• As of 2007 only 25% of trains operational
***Most Nigerian roads, refineries, railways, airports, power plants and water/ sanitation
utilities date to the oil boom in the 1970s
2015 Outlook
• Moderate growth of 5%, due to vulnerability to
• slow global economic recovery
• oil-price volatility
• The low oil price will lead to a sharp decline in fiscal revenues
• Overall impact on non-oil sector GDP will be relatively muted
• Oil sector is expected to remain the main driver of growth over the medium term and,
in the light of the recent macroeconomic challenges, the government has adopted an
adjustment strategy that hinges on tightening government spending and shoring up
non-oil revenues to compensate for dwindling oil revenues.
Beyond 2015
A New Dawn?
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Governance
Security
Infrastructure
Economy
Beyond: Governance
• Public enemy #1: CORRUPTION…but it’s the only thing that works
“This is not a country that is morally convinced about [the evils of] corruption: corruption is
the only thing that works.”
– Bishop Matthew Kukah, leading religious figure and moral authority in Nigeria.
Patrimonialism
Neopatrimonialism
Clientelism
• Weak Institutions
• Legislature
• Judiciary
• Rule of Law
• Elections (2015 Success)
• Security
• Police
• Military
• Insurgents
Beyond: Security
• Boko Haram in the North
• Prison De-radicalization
• Economic Development
• Infrastructure
• Police and Military
• Build Trust with Communities
• Training & Joint Operations
• Infrastructure
• Rebel Payments
Beyond: Infrastructure
• Electricity
• Currently 185/189 infrastructure – 67/217 for output
• 1300 – 4800 MW (Production at given time) • 24.87 Billion kWh
(Output in 2015)
• 257.9 Billion kWh (South Africa)
• 4099 Billion kWh (United States)
• Transportation
• Rail = ¼ of 1960s level
• Road = 20% paved
• Inefficient Supply Chain & Poor Link to Market
• Ports
• No Deep Water capability
• Burdensome Customs
• Traffic in Lagos
Beyond: Economy
• Global Competitiveness Index
• 127/144 – Pretty Low
• Stage 1 – Factor-Driven Economy
• Areas Needing Most Improvement
• Institutions (Basic)
• Corruption, Trust, Bribes/Graft, Waste, Cost of Violence
• Infrastructure (Basic)
• Roads, Rail, Ports, Electricity
• Health and Primary Education (Basic)
• Malaria, Infant Mortality, Life Expectancy, Primary Enrollment
• Goods Market Efficiency (Efficiency Enhancer)
• Trade barriers, Customs Procedures, Import-Heavy
• Until the Basics are Met, Nigeria Cannot Transition to a Stage 2 Economy
Beyond: Economy
• Resource Curse
Mechanism of the Resource Curse
The Fix
Economic Instability Tied to Market Volatility
Stability Fund
Government Income
Direct Treasury Allotment
Long-Term Economic Growth
Future Generations Fund
Poverty Alleviation
Priority Sectors Fund (Education, Health, Rural
Development, Infrastructure, Environment)
Indigenous Considerations
Oil-Producing Region Compensation Fund
Behavior Mechanisms (Rent-Seeking, Corruption)
State, Independent Watchdogs (Access & Overlap)
Institutions
Capacity Building Projects (Tech Assist and
Training to Nigeria’s Oil Workers)
• Diversify
• New Revenue Streams
• Services (50% Revenue)
• New Tax Schemes
• Nollywood
• Reduced Corruption (Plugging Leaks)
• Agriculture
• Stop Subsidies (Petrol – Fuel/Kerosene)
• Manufacturing
Beyond: Economy
• Protectionism (Mercantilism) – Makes construction very expensive
• Cement
• Dangote Cement (Connected) - 60% Margin
• Lafarge (French firm) = Competition
• Resulted in reduced construction costs by 40%
• Resulted in Increased construction
• Textiles
• Until 2010, ban on imports to spur local economy
• Resulted in underdeveloped retail Industry
• Automobiles
• Heavy import Tariff
• Imports down 2/3
• Benin (Neighbor) up 3x
• Resulted in flourishing black market
• The Market Will Find a Way